More Info On Prospective Buyer For House #1

My tenant was finishing his moving out on Saturday, and called to tell me a couple stopped by and wanted to look at the house. He asked me if it was okay to show them the house, and I said "Yes". A few hours later, I get a call from the lady. She literally talked for a good 5 minutes straight on how this house was their "dream" house, etc. She said they saw the floor plan months ago when looking for a home, and fell in love with it. In that time, they lost out on two other homes with the same floor plan in that neighborhood - one by two hours. She (and her husband) saw my house house and "just had to see if it was the same floor plan." When the tenant let them look inside, they knew they wanted it, and when they saw the huge backyard, they wanted it even more - as the woman said, "we wanted it TODAY - you don't even have to clean up the place!"

Now for the wrench ...

After I let the woman talk, I finally got to bring her down a bit to reality. She mentioned that she had gone through a divorce, and her credit was shot. However, they have been pre-approved for $126,000 using just her husband's credit information. She noticed that my sign had once said "Owner Financing" (I wrote it with permanent marker, but used athletic tape to cover it up - it still bled through a little), and asked if it were possible to carry back a 2nd note for the difference. I told her it was a possibility, but I would need to consult my wife on the idea, and see if it was prudent for me to do so. The lady kept referring to the 2nd note as "short term", but I'm thinking she hasn't really given thought to how much she would be paying each month. We also talked about some other things.

After getting off of the phone, I quickly ran some numbers ...

List Price ..... $142,900
Loan Balance ... $103,750
80% 1st Loan ... $114,320
20% 2nd Loan ... $ 28,580

Now, if they put nothing down (more about this later), I'd get $114,320-$103,750= $10,750 at closing (excluding closing costs). I figure if they don't put any money down, my position would be VERY risky as I'm SOL if the 1st forecloses. Therefore, I'd make sure to at least put a high interest on the 2nd - something like 16%. This would make the monthly payments on a 30yr amortization of $384.

So, $10k at closing (probably more like $8-9k after all the closing costs), and $384/mo cash flow for "n" months. I was also thinking of putting a term of 3-5 years in the contract, so I could get my money sooner. I figure if they refi in 5 years, I would have earned $384.33x12x5= $23,000+ from the cash flow, PLUS the balance of the loan would still be something like $28,000. In essence, I'd make $11,000+$23,000+$28,000= $61,000 altogether from this deal. The part I'm struggling with is them not putting any money into the deal and me being in 2nd position.

I also talked with the husband, and he said they have a friend who their using as their mortgage broker. He started talking in circles about how the guy told them their financing position, and what he could do for them, and so on. He totally lost me - partly because I think he himself didn't understand what the mortgage vroker was saying. I asked him if it were possible for me to talk to his mortgage broker to get a clearer picture of what he was saying, and the man said he could have the broker call me on Monday (today). So we'll see how that conversation goes.

Once I understand what the broker was feeding (er, telling) this guy, I'll have a better understanding on what I can provide these people, if anything. My next step - if it works out - will be to have them sign a contract, put some earnest money down, and start escrow.